Ita/67/2008 Of M/S Sri Saleswara Industries v. The Income Tax Officer

IN THB HIGH COURT OF KARNATAKA AT BANGALOREDATEBD THIS THE DAY OF JUNE, 2014. PRESEHBN THE HON’BLE Mr. JUSTICK N. KUMAR AND THR HON’BLE Mr. JUSTICE B. MANOHAR| I.T.A. No. 67/2008 C/w. 68/2008 I.T.A. No.67/2008 BRTWREN :M/s. Sri SALESWARA INDUSTRIESMAHAJANAHALLIREP. BY ITS PARTNER.Sri. D. SHAMBULINGAPPASHIMOGA ROADHARIHAR.APPELLANT | (BY Sri. R. RAMAMURTHY, ADV.) AND : THR INCOME TAX OFFICKR.WARD — 3 DAVANGERE. _. RESPONDENT (BY Sri. K.V. ARAVIND, ADV.) THIS I.T.A. IS FILED UNDER SECTION 260-A OF.LT. ACT, 1961 TO SET ASIDE THE ORDER DATED|26.06.2007 PASSED IN I.T.A. No. 970/Bang/2006 FOR|THER ASSESSMENT YBAR 2001-02. 2 I.T.A. No.68/2008 BBRITWREN M/s. Sri SALESWARA DRYERSMAHAJANAHALLI REP. BY [ITS PARTNERSri. O. BASAVARAJAPPA SHIMOGA ROAWDHARIHAR.APPELLANT | (BY Sri. R. RAMAMURTHY, ADV.) AND: THR INCOME TAX OFFICEKBWARD — 3DAVANAGE RE. _. RESPONDENT (BY Sri. K.V. ARAVIND, ADV.) THIS I.T.A. IS FILED UNDER SECTION 260-A OF)I.T. ACT, 1961 TO SET ASIDE THE ORDER DATED.03.08.2007 PASSED IN I.T.A. No. 571/Bang/2006 FORTHE ASSKHSSMENT YBAR 2001-02. THRSK APPBALS COMING ON FOR HBARING|THISDAY,N.|KUMAR,J>2DBLIVERE]DTH EFOLLOWING; JU DGMENT These two appeals were admitted to consider thefollowing substantial questions of law which arise forconsideration in both the appeals:-_ IWhether, the Tribunal ts right in fixing the saleconsideration at Rs.65 lakhs as against Rs.45consideration at Rs.65 lakhs as against Rs.45 lakhs in registered sale deed?| ITWhether, the Tribunal ts right in fixing the saleconsideration basing on the guideline valuesadopted by the Sub-Registrar for the purposesof registration ofproperty?consideration basing on the guideline valuesadopted by the Sub-Registrar for the purposesof registration ofproperty? LLL.Whether, the Tribunal is right in consideringas a sale consideration a sum of Rs.25 lakhswhich the purchaser through its ManagingDirector which the appellant has return to,without examining the Managing Director Sri.K.R. Subramanian.as a sale consideration a sum of Rs.25 lakhswhich the purchaser through its ManagingDirector which the appellant has return to,without examining the Managing Director Sri.K.R. Subramanian. lV.Whether, the order of the Tribunal fixing thesale consideration at Rs.65 lakhs in place ofsaleconsiderationof|Rs.45.lakhs1S Sustainable in lakhs.sale consideration at Rs.65 lakhs in place ofsaleconsiderationof|Rs.45.lakhs1S Sustainable in lakhs. oD TheaSSCSSEEM/s.|Sri.Saleswara.Industries, appellant in I.T.A. No. 67/2008, is apartnership firm which carried on business inbulling paddy and dealt in Rice, Jowar etc. Thispartnership firm which carried on business inbulling paddy and dealt in Rice, Jowar etc. This assessee and another partnership firm by nameM/s. Sri Saleswara Dryers, which is the appellantin the connected matter have jointly sold its landand building and machinery to M/s. Taj MahalIndustries (P) Ltd., represented by its ManagingDirector Sri. K.R. Subramanian. The sale was.effected through a registered sale deed dated29.11.2000 for a consideration of Rs.45,00,000/-.The sale consideration was apportioned betweenthe appellants in these two appeals in a sum ofRs.295,00,000/- and Rs.20,00,000/- respectively.The assessee deducted value of machinery asdepreciated which was at Rs.10,24,378/- andcommission of Rs.50,000/- paid for effecting saleto arrive at the balance for the purposes ofcomputation of capital gains. The assessee arrivedindexed value of land at Rs.30,77,228/ and workedout long term capital losses of Rs.16,51,966/- andfiled return of income for the assessment year2001-02. In the connected appeal, the appellantassessee received Rs.20,00,000/- to its share of saleconsiderationanddeductedvalueot|machinery|as|depreciatedwhichWa SRs.9,06,623/- and commission of Rs.50,000/- paidfor effecting sale to arrive at the balance for thepurpose of computation of capital gain. TheappellantworkedOUTlong|TermlossAT|Rs.2,99,297/- and filed return of income for theassessment year 2001-02. However the assessingauthority passed separate orders in respect of boththese appeals determining the long term capitalgainsAT|Rs.39,43,314/-andRs.33,63,942/-respectively in place of long term loss claimed byboth the assessees. The assessing authority tookthe sale consideration of Rs.54,02,/05/- as againstRs.25,00,000/- and Rs.43,22,165/- as againstRs.20,00,000/-.offered bythe aSSECSSCE1ncomputing the long term capital gain. Aggrieved bythe same, the assessees preferred appeals beforethe Commissioner of Income Tax (Appeals). Boththe appeals came to be dismissed. Aggrieved bythe said orders, both the assessees preferred appeals before the Income Tax Appellate Tribunal.The Tribunal fixed the total consideration of sale at.Rs.65,00,000/- in place of Rs.45,00,000/- andaccordingly, allowed the appeals partly. Aggrievedby these two appeals the assessees have preferredthese two appeals. 3.|LearnedCounsel{OrtheasSsSE€SSEcontended that once the Tribunal has recorded acategoricalfindingthat|the.paymentoT|consideration of Rs.97,24,8/70/- as calculated bythe assessing officer is not proved, the Tribunalcouldnotfixthe|sale|considerationaT|Rs.65,00,000/-, taking into consideration themarket value prevailing as on the date of the saleand also by taking note of the payment receivedsubsequent to the sale transaction which in fact,the assesses have repaid. He also contended thatthe repayments were made to K.R. Subramanian,the Managing Director of the purchaser in spite ofhis request to make available him for cross-examination, the assessing authority proceeded to pass the order. The appellate authority calledupon the assessee to examine, by that time K.R.Subramanian had left the employment of thepurchaser and therefore, one Challaiah wasexamined at Chennai and the assessees had no!opportunity to cross-examine the said person. It is"on the basis of this evidence, the findings wererecorded. He submits that the orders passed areillegal and therefore, they are required to be setaside. 4. Per contra, learned Counsel for the.revenue pointed out that the consideration paidunder the sale deed went directly to the bankaccount of the assesses which was utilized forrepayment or discharge of the loans and theassessees have categorically admitted that theyhave purchased land and buildings out of the saleconsideration. All the payment except Rs.25,000/-—is paid by cheque, though one of the partners havedenied the signatures on the cheques andmaterials on record discloses that the cheques have been encashed. When three Courts have.recorded a finding of fact, this Court cannotinterfere in the second appeal and the factualmatrix does not arise. 5. The material on record discloses that the|aSSECSSECEhave|sold|thepropertyunderaaregistered sale deed for a sum of Rs.45,00,000/-.The evidence on record shows that the chequeissued for Rs.50,00,000/- and the same wascredited to the bank account of the assessees for.the discharge of the loan. Apart from the saidpayment of Rs.50,00,000/-, prior to the sale andsubsequent to the sale, cheques have been issuedto the partners of the assesses firm. It is.contended on behalf of the assessees that they areself cheques. The cheques were encashed and arenot disputed. The contention is that they were selfcheques and after realization, there was repaymentto the purchaser. Though the said argument looksattractive and absolutely no materials is placed onrecord by the assessees to show that the assessees 5. The material on record discloses that the|aSSECSSECEhave|sold|thepropertyunderaaregistered sale deed for a sum of Rs.45,00,000/-.The evidence on record shows that the chequeissued for Rs.50,00,000/- and the same wascredited to the bank account of the assessees for.the discharge of the loan. Apart from the saidpayment of Rs.50,00,000/-, prior to the sale andsubsequent to the sale, cheques have been issuedto the partners of the assesses firm. It is.contended on behalf of the assessees that they areself cheques. The cheques were encashed and arenot disputed. The contention is that they were selfcheques and after realization, there was repaymentto the purchaser. Though the said argument looksattractive and absolutely no materials is placed onrecord by the assessees to show that the assessees would have made the payment to them or it wasencashed by them or by some other person andfurther, there is no material on record to show thatit was paid back as contended by the assessees.The fact remains that all cheques issued amountsto Rs.97,24,8/70/- which is the total considerationand deducting Rs.25,000/- paid by cash. Theconsideration mentioned in the sale deed isRs.45,00,000/- and the cheque issued is forRs.50,00,000/- and it was credited to the accountof the assesses towards the discharge of the loans.One of the partners has categorically admitted thatalter the sale of the property, they have purchasedsome lands and buildings out of the _ salconsideration and towards discharge of the loan. Itis for them to explain what is the _ exacconsideration they have received over and abovementioned in the sale deed. It is in this contextthat the Appellate Authority has held that|Basavarajappa, the partner who has admitted thereceipts of Rs.65,00,000/- coupled with the fact that the market value was Rs.62,38,000/- and thatin view ot the consideration which has been.mentioned in the sale deed of the said property isRs.65,00,000/- and they are liable to pay the taxon the said amount. In the circumstances, we donot find any error committed by the tribunal inarriving at the said conclusion. Therefore, weanswer the substantial questions of law in favourof the revenue and against the assessees. Nomerits, both the appeals are dismissed. LRS/nvj. od/-|JUDGE. od/-JUDGE. JUDGE.